Most tradies aren't trying to dodge tax — they just don't know the rules. The result is either paying more tax than necessary (by missing deductions) or not enough (by missing obligations), both of which cost money.
Here are the eight mistakes IRD sees most often, and what to do about each one.
Mistake 1: Mixing Personal and Business Finances
Using one bank account for everything — wages, groceries, materials, petrol — is the most common mistake and the one that causes the most headaches at tax time.
When personal and business transactions are mixed, it's nearly impossible to quickly identify deductible expenses. You end up either over-claiming (risky) or under-claiming (expensive) because you can't tell what's what.
Fix: Open a dedicated business bank account. It takes 20 minutes and costs nothing. Pay yourself a regular amount from the business account — treat it like a wage. This creates a clean line between business income/expenses and personal spending.
Mistake 2: Missing the GST Registration Threshold
You're required to register for GST when your turnover exceeds $60,000 in any rolling 12-month period. Miss this and IRD can backdate GST obligations — meaning you owe GST on invoices you've already issued and been paid, with no ability to recover it from clients after the fact.
Fix: Track your rolling 12-month turnover monthly. If you're approaching $50,000, talk to an accountant. Register before you hit the threshold, not after.
Mistake 3: Not Keeping a Vehicle Logbook
Vehicle expenses are one of the largest deductions available to tradies, and IRD focuses on them in audits. If you're claiming vehicle costs without a logbook to establish business-use percentage, your claim is at risk.
The standard "25% method" (claiming 25% of running costs without a logbook) is available but limited. If you're actually using your van or ute for 70%+ business purposes, a 90-day logbook could unlock a much bigger deduction.
Fix: Keep a logbook for 90 consecutive days every three years (or when your business-use pattern changes). Record every trip — from, to, purpose, kilometres. IRD requires this to justify anything above the 25% default.
Mistake 4: Claiming 100% on Mixed-Use Assets
Your work phone gets used for personal calls. Your van occasionally gets used for weekend trips. Your home internet plan supports both work emails and Netflix.
Claiming 100% of these costs as business expenses is incorrect and creates audit risk. IRD expects proportional claims based on actual business use.
Fix: Estimate realistic business-use percentages. 70% for your van if you occasionally use it personally. 50% for your phone if half your calls are personal. Document your reasoning. It doesn't have to be exact, but it needs to be defensible.
Mistake 5: Poor Record-Keeping (IRD Requires 7 Years)
IRD can audit returns up to four years old (or further back if fraud is suspected). If you can't produce records — receipts, invoices, bank statements, logbooks — your claimed deductions can be disallowed.
Cash receipts fade. Emails get lost. Shoebox accounting creates real problems when you need to find a $4,500 materials receipt from two years ago.
Fix: Scan and store every business receipt digitally on the day you receive it. Apps like Dext, ReceiptBank, or just emailing photos to a dedicated folder work fine. Cloud backup means records survive even if your phone or laptop is lost.
Mistake 6: Forgetting Provisional Tax Instalments
When your end-of-year tax bill exceeds $5,000, you become a provisional taxpayer — meaning IRD expects you to pre-pay tax across three instalments during the year. The dates are fixed: 28 August, 15 January, and 7 May.
Many tradies don't realise they've become provisional taxpayers until they get a letter from IRD. By then, an instalment has already passed and interest is accruing.
Fix: Ask your accountant after each year-end whether you'll be a provisional taxpayer next year. If yes, set payment reminders in your calendar immediately. Better still, set aside 25–30% of income into a separate account every week so you're never scrambling for funds on the due dates.
Mistake 7: Not Claiming All Legitimate Deductions
Underclaiming is just as expensive as overclaiming — you just give the money to IRD voluntarily. Common missed deductions include:
- Accounting and bookkeeping fees (fully deductible)
- Business insurance (public liability, tools cover, income protection)
- Professional memberships and subscriptions (trade associations, software)
- Training and upskilling (courses, safety certificates)
- Home office (if you genuinely use a dedicated space for admin)
- Tools under $1,000 (can be immediately expensed rather than depreciated)
- The 20% Investment Boost (currently available on eligible depreciable assets — check if your recent tool purchases qualify)
Fix: Review our NZ Tradie Tax Deductions Guide and take the list to your accountant every year. Good accountants ask about new assets and expenses — but they can only claim what you tell them about.
Mistake 8: Having No Professional Tax Advice
Many tradies try to manage their own taxes to save money. For very simple sole traders with low turnover and minimal expenses, this can work. But once you have a van, tools, subcontractors, employees, or a company structure, the interactions get complex — and mistakes become expensive.
A good accountant typically costs $1,000–$2,500/year for a sole trader tradie. They routinely find deductions worth more than their fee, help with provisional tax planning, and give you one less thing to stress about.
Fix: Find a local accountant who works with tradies. Ask other tradies who they use. Interview two or three and ask what they typically find for clients in your situation. If they can't give a clear answer, keep looking.
Key Takeaways
- Separate your bank accounts from day one
- Track rolling turnover — register for GST before you hit $60k
- Keep a vehicle logbook — it's the single biggest deduction lever
- Claim proportional costs on mixed-use assets
- Store receipts digitally and keep records for 7 years
- Calendar your provisional tax due dates: 28 Aug / 15 Jan / 7 May
- Check for all deductions — underclaimiing is money left on the table
- Get a tradie-focused accountant — their fee pays for itself
Our free Vehicle Log Book template is IRD-compliant and ready to print. And use our GST Calculator to keep on top of what you're collecting and what you owe.
NZ Tradie Tools provides free calculators, templates, and guides for New Zealand tradies. Always consult a registered tax agent or accountant for advice specific to your situation.